The American Council for an Energy Efficient Economy (ACEEE) selected tariffed on-bill financing among the innovative models raised at its 7th Finance Forum on deploying capital in efficiency markets. Each year, the Energy Efficiency Finance Forum brings together experts across multiple sectors to learn more about which models are working and why. Accepting the ACEEE invitation this year, Clean Energy Works presented a briefing on expanding energy efficiency with inclusive financing models, introducing the Pay As You Save® (PAYS®) system.
Drawing first on experience with loan-based models for the residential sector in Connecticut and New York, the briefing showed the scale of missed opportunity in the loan-based models. Less than half of the households evaluated for upgrades in these loan-based systems actually secured financing for the investment. By contrast, multiple utilities offering a PAYS tariff have reported more than half of customers offered an investment in efficiency upgrades are moving forward.
As an additional advantage of the PAYS program, renters are eligible for tariffed on-bill investment programs, whereas they are routinely disqualified from loan programs. Excluding renters affects half of all households below median income in the U.S. Common underwriting criteria for creditworthiness also disqualifies a significant portion of low and moderate-income homeowners.
As a result, the PAYS system not only increases the customer conversion rate, but it also vastly expands the size of the market that can be be addressed with the financing solution. These features improve the value proposition for contractors that can market energy efficiency upgrades to existing and new customers. These contractors have greater motivation when the eligible market is large and the customer conversion rate is high. All of these factors together drive rapid growth in the deployment of capital for energy efficiency for cost-effective upgrades.